A Strong 2015 Should Spell a Strong 2016 for the Apartment Industry

Despite breaking its 5 percent effective rent growth streak, the apartment industry saw its longest consecutive run of effective rent growth at or above 4.7 percent in 2015. National average rent grew year over year from $1,188 in Q4 2014 to $1,244 in Q4 2015.

Most of the growth occurred in the first three quarters of the year, while hot markets moderated somewhat in the fourth quarter. Markets such as San Francisco and San Jose had experienced double-digit growth early in 2015 that couldnt be sustained through the end of the year. But only one of the top 50 markets  Oklahoma City  actually experienced negative rent growth.

Occupancy rates were also noticeably high at 95 percent in the fourth quarter of 2015, which is the highest fourth-quarter level since 2000.

Axiometrics forecasts growth to continue through 2020, thanks to continued job growth and a preference toward renting over buying. New supply should also help fuel growth but could become problematic if developers bring too much online in 2017 and 2018. An early recession could also hamper growth.